The Canadian provincial government of Newfoundland and Labrador, and Kruger Inc., the parent of paper mill Corner Brook Pulp and Paper, have agreed to a deal intended to secure the future of the mill workers’ struggling pension plan.
According to the terms of the agreement, the government will acquire a security interest in Corner Brook’s power assets at Deer Lake and Watson’s Brook in exchange for an irrevocable letter of credit from a financial institution backed by a government guarantee. The letter of credit will be held by a trust for the benefit of pension plan members, with government and Corner Brook representatives as co-trustees. The deal will reportedly allow the paper company to add $88 million into the pension plan.
“Our government is committed to protecting the interests of pension plan members, and this arrangement helps ensure the sustainability of the pension plans into the future,” said Perry Trimper, Minister of Service for Newfoundland and Labrador in a statement. “This innovative solution will enable the company to meet its pension funding obligations, while allowing it to focus on meeting its commitments to capital investments and operations under agreements made in 2014.”
The deal stipulates that if Corner Brook ceases operation, the letter of credit would be called by the trustees to secure any outstanding pension obligations, the amount of which would be deducted from the purchase price of the power assets and water rights. According to a 2014 power assets and water rights purchase agreement, the government has a pre-existing obligation to purchase the company’s power-generating assets in the event of the paper mill’s closure.
The government said that an amendment to the Schedule of the Loan and Guarantee Act, 1957, is required and will be introduced during the current session of the House of Assembly. Amendments will also be necessary for the Pension Benefits Act Regulations for the deal to go through.